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2021 (7) TMI 1136 - AT - Income TaxAllowability of enhanced compensation - AO had disallowed the expenses but CIT(A) has held that AO was not justified in disallowing the expenses - HELD THAT:- Assessee has paid enhanced rent pursuant to the agreement entered into in 1996, but in any of the earlier years in the assessments that have been framed, no disallowance of rent has been made by Revenue. We agree with the contention of DR that the principle of res judicata is not applicable to income tax proceedings and each assessment year is an independent but at the same time the Hon’ble Supreme court in the case of Radhasoami Satsang vs CIT [1991 (11) TMI 2 - SUPREME COURT] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspact permeating through different assessment years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, then it would not be appropriate to allow the position to be changed in the subsequent year - based on the view of disallowance of enhanced rent paid in the year under consideration, no reassessment proceedings for earlier years has been initiated by the Revenue. Considering the totality of the aforesaid facts and relying on the aforesaid decision rendered in the case of Radhasoami Satsang (supra), we find no reason to interfere with the order of CIT(A). Thus the ground of Revenue is dismissed. Commission paid to shareholder Directors - disallowance made by AO of the commission paid to the whole time Directors of the company - HELD THAT:- As undisputed fact that three whole time working Directors had been paid commission and the commission payment is as per the limits prescribed under the Companies Act, the commission payment has been approved by the shareholders in the general meeting of shareholders. It is the case of AO that no dividend has been paid by the assessee and had the assessee not paid the commission, it would have been required to distribute the amount as dividend necessitating the payment dividend tax. The aforesaid observation of the AO of assessee not paying of dividend is contrary to the fact as the assessee has been paying dividend in the past and during the year under consideration, assessee has paid dividend @ 50% to its share holders. Before us, Revenue has not pointed out any fallacy in the findings of CIT(A) nor has controverted to the factual submissions made by Learned AR. Disallowance u/s 14A r.w.r 8D - HELD THAT- It is an undisputed fact that assessee has earned dividend of ₹ 50,900/- and had suo moto worked out the disallowance u/s 14A r.w.r 8D of the Act at ₹ 3,12,523/-. AO has further disallowed ₹ 3,12,707/- u/s 14A of the Act resulting into double disallowances. We find in the case of Joint Investments Pvt. Ltd.[2015 (3) TMI 155 - DELHI HIGH COURT] has held that the disallowance u/s 14A r.w.r 8D cannot exceed the dividend income - find no reason to interfere in the order of CIT(A) and thus the ground of Revenue is dismissed.
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